Goodwill and Intangible Assets, Net

3 Months Ended

Sep. 30, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Note 8 – Goodwill and Intangible Assets, Net

Goodwill

Goodwill was $1.35 billion at September 30, 2015 compared with $1.29 billion at June 30, 2015. The increase in goodwill in the three months ended September 30, 2015 versus June 30, 2015 was primarily associated with the following: increases of $73.1 million and $0.1 million in connection with the acquisitions of Symphony Teleca Corporation (“STC”) and Red Bend Ltd. (“Redbend”), respectively, and decreases of $4.3 million and $0.4 million in connection with the acquisitions of I.P.S.G International Product Solution Group Pty Ltd. and VFX Systems Pty Ltd. (collectively “IPSG/VFX”) and certain automotive assets and liabilities of Bang & Olufsen A/S (“B&O”), respectively, partially offset by unfavorable foreign currency translation of $7.0 million.

As more fully discussed in Note 18 – Business Segment Data, we revised our segment and reporting unit structure effective July 1, 2015. Under this new structure, our former Infotainment segment is now known as Connected Car, our former Lifestyle segment is now known as Lifestyle Audio, our former Professional segment is now known as Professional Solutions and our former Services segment is now known as Connected Services. Our Connected Services segment includes STC, as previously reported, and also now includes Redbend and our automotive services businesses. Redbend had previously been included within Other. Our automotive services businesses had previously been included within our Infotainment and Lifestyle segments. Other includes compensation, benefits and occupancy costs for corporate employees, net of reporting segment allocations, as well as expenses associated with new technology innovation and our corporate brand identity campaign. Our reporting units are the same as our reportable segments with the exception of Lifestyle Audio, which consists of two reporting units, automotive audio and consumer audio. In connection with this realignment, we reallocated our goodwill to our new reporting units based on each reporting unit’s relative fair value. We also performed a goodwill impairment test as of July 1, 2015 using our new reporting units. We determined that the fair value of each of our reporting units exceeded its carrying value and, as such, no impairments were deemed to exist as of this date.

The changes in the carrying amount of goodwill by business segment for the three months ended September 30, 2015 were as follows:


	Connected Car			Lifestyle Audio			Professional Solutions			Connected Services			Other			Total
Balance, June 30, 2015	$	24,422		$	159,088		$	387,861		$	529,367		$	186,442		$	1,287,180
Realignment adjustments⁽¹⁾		(3,673	)		(6,738	)		0			196,853			(186,442	)		0

Balance, June 30, 2015 – adjusted		20,749			152,350			387,861			726,220			0			1,287,180
Acquisitions and adjustments⁽²⁾		(0	)		(395	)		(4,265	)		73,196			(0	)		68,536
Other adjustments⁽³⁾		62			(2,199	)		(3,116	)		(1,702	)		(0	)		(6,955	)

Balance, September 30, 2015	$	20,811		$	149,756		$	380,480		$	797,714		$	0		$	1,348,761

⁽¹⁾	The realignment adjustments reallocate our goodwill based on our new reporting structure based on the relative fair value of each reporting unit.

⁽²⁾	Refer to Note 22—Acquisitions for more information.

⁽³⁾	The other adjustments to goodwill primarily consist of foreign currency translation adjustments.

We did not recognize any goodwill impairment charges in our Condensed Consolidated Statements of Income in the three months ended September 30, 2015 and 2014.

The contingent purchase price associated with the acquisition of innovative Systems GmbH (“IS”) is calculated pursuant to the terms of an agreement between the parties. Certain terms of the agreement are currently subject to a dispute between the parties and the matter has been submitted to arbitration. On November 5, 2013, the arbitration panel issued a partial award on some of the disputed matters covering the period from February 2009 through January 2012 awarding €16.3 million to the IS sellers. We contested the enforcement of the partial award. In July 2014, the partial award was upheld. During the fiscal year ended June 30, 2015, we paid the €16.3 million partial award. Until such time as the other disputed matters are resolved, we cannot calculate the contingent purchase price related to these other disputed matters.

Intangible Assets, Net

Net intangible assets were $542.1 million and $669.7 million at September 30, 2015 and June 30, 2015, respectively, and were comprised of the following:


	Weighted Average Amortization	September 30, 2015							June 30, 2015
	Weighted Average Amortization	Gross Carrying Amount		Accumulated Amortization			Net Amount		Gross Carrying Amount		Accumulated Amortization			Net Amount
Customer relationships	12 Years	$	389,566	$	(42,605	)	$	346,961	$	503,928	$	(30,924	)	$	473,004
Technology	6 Years		85,112		(20,800	)		64,312		87,090		(17,653	)		69,437
Patents	15 Years		7,414		(1,366	)		6,048		5,136		(1,265	)		3,871
Trade names⁽¹⁾	1 Years		100,826		(19,465	)		81,361		100,827		(15,282	)		85,545
Non-compete agreement	4 Years		3,147		(1,671	)		1,476		3,168		(1,543	)		1,625
Software	5 Years		49,140		(8,204	)		40,936		42,013		(6,863	)		35,150
Other	6 Years		7,263		(6,276	)		987		7,242		(6,207	)		1,035

Total		$	642,468	$	(100,387	)	$	542,081	$	749,404	$	(79,737	)	$	669,667

⁽¹⁾	Includes $55.7 million and $18.5 million of indefinite-lived intangible assets related to the acquisition of AMX LLC and AMX Holding Corporation (collectively “AMX”) and Martin Professional A/S, respectively.

Amortization expense related to intangible assets was $21.1 million and $6.2 million for the three months ended September 30, 2015 and 2014, respectively.

At September 30, 2015, amortization expense is expected to approximate the following:


2016	$	62,722
2017		68,040
2018		62,976
2019		58,445
2020		53,632
Thereafter		161,895

Total	$	467,710

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References + Details